Observations focused on the problems of an underdeveloped country, Venezuela, with some serendipity about the world (orchids, techs, science, investments, politics) at large. A famous Venezuelan, Juan Pablo Perez Alfonzo, referred to oil as the devil's excrement. For countries, easy wealth appears indeed to be the sure path to failure. Venezuela might be a clear example of that.

Archive for June 1st, 2006

Chavez’ lawyer Esther Bigott de Loaiza, the same one with the $18 million retainer problem, will supposedly be charged by the Prosecutor for being at a meeting of opposition figures in order to attempt to block the jailing of a businessman for being one of the people behind the Anderson assasination. Supposedly she was gpoing to split a Bs. 1 billion (US$ 465 thousand at the official rate or US$ 384 thousand at the parallel rate) payment to intervene in his behalf. Her response?

“I would not meet with conspirators for only Bs. 500 million. Anyone that thinks so does not know what I charge. No way, that is not enough even to go on vacation”

I find it remarkable that this type of article gets by the New York Times Editors. besides the many factual errors like production levels, area and the like, there is the fact that indeed Venezuela may have amazing reserves of heavy crudes, but funny how no mention is made of the Alberta tar sands, which may not have the reserves of the Venezuelan ones, but it may only be a factor of two off.

Business people are not brain dead. When they decide to go somewhere and invest, they run numbers, do risk analysis, then models and that determines where they will invest. So compare the conditions in Venezuela and Canada, which the people who wrote the NYT article appear to have no clue about neither of them, and you get:

Venezuela:

Breach of contracts.No rule of Law.PDVSA has to own at leats 60%33% royalties50% income taxBreakeven point ~$25 per barrel

Canada:

Rule of LawYou may own 100% of the production companyRoyalties of 1% until revenues generated are equal to investment, 16.6% after that24-28% income taxes.Breakeven point ~$12 per barrel

Yes, costs in Venezuela are somewhat lower, lower labor costs, fewer enviromental regulations, but the difference is simply not worth it. That is the reason why Canada’s heavy crude production is already twice the Venezuelan one and growing, while Venezuela’s is not epexcted to increase in the next two years.

Today
at the opening ceremony of the OPEC meeting in Caracas, Venezuelan President
Hugo Chavez, remembered
a letter written to him, and his reply to it, by his “friend” the
terrorist Carlos
“The Jackal”, ,who is serving a lifetime sentence in a French
prison for killing three people in Paris, including two secret service agents.

This was a touching and brainless remembrance by our President in front of the
OPEC delegates, given that Carlos “The Jackal” is infamous for, among
many terrorists acts, the kidnapping
the 12 Ministers of OPEC, holding 70 people hostage and killing the
security detail at OPEC’s Vienna’s headquarters. Reportedly he got paid one
million dollars for this action by none other than Libya’s President Gaddafi.

What’s next, toasting Bin Laden at the dinner which closes the event? Anything is
possible in the mindless ways of Hugo Chavez.

I know most of you don’t speak Spanish, but these are images of a town in Zulia where 30 kids die monthly, where hunger and malnutrition are the rule of the day, while Chavez travels giving away the country’s money to promote himself. Maybe it is better you don’t understand, it is simply heartbreaking.